Engineering firm Fluor has been awarded a contract to build a floating production, storage and offloading (FPSO) vessel for a oil and gas field redevelopment project in the North Sea.

A final investment decision by Shell on the redevelopment of the Penguins field, north-east of Shetland, paves the way for the FPSO vessel to be built.

The redevelopment will see an additional eight wells drilled at the site, which will be tied back to the new FPSO vessel. Natural gas will then be exported through the tie-in of existing subsea facilities and additional pipeline infrastructure. The FPSO is expected to have a peak production of about 45,000 barrels of oil per day.

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Steve Phimister, Shell's Vice President for Upstream in the UK and Ireland, said: "Shell has had a strong presence in this part of the northern North Sea for more than forty years.

"Having reshaped our portfolio over the last twelve months, we now plan to grow our North Sea production through our core production assets. In doing so, we will continue to work with the UK government, our partners and the regulator to maximise the economic recovery in one of Shell's heartlands."

Deirdre Michie, Chief Executive of Oil & Gas UK, welcomed the announcement.

"This is great news and an exciting start to the new year," she said.

"A global leader like Shell making a commitment on this scale demonstrates the investment potential the UK Continental Shelf still holds. It also shows the importance of the efficiency improvements our industry has delivered which have helped make redevelopment projects like this commercially attractive.

"We are hopefully entering a more positive phase for our industry in the UK with new projects on the horizon that I hope will bring a much needed boost for companies in the supply chain."

(LM/MH)